The health insurance marketplace, also known as the ACA (Affordable Care Act) or Obamacare, offers individual health insurance plans for people who don’t have access to an employer or government-sponsored health plan.
Since its formal introduction in 2010, the Affordable Care Act has drastically changed health insurance and healthcare in the United States and has had a huge effect on the choices available for individual health insurance consumers. Among the many provisions of the ACA, a few of the most significant mandates include guaranteed issue policies (no health underwriting), no pre-existing condition exclusions, “essential health benefits”, and taxpayer-funded premium subsidies based on household size and income.
When first rolled out and to this day, the topic of the ACA, or Obamacare, as it is most commonly referred to, is an unpopular subject among many people, even those who are not directly affected. Even the word Obamacare seems to frighten some people, causing a lot of pushback and misconceptions with The Marketplace. This was especially true when there was a tax penalty for not having an ACA-compliant health plan, but the penalty has been revoked since 2018.
However, only about 10% of the insured population requires individual health insurance, as most Americans have coverage through their employer or through a public program such as Medicare or Medicaid. As a result, the marketplace and other individual health insurance options fall very low on the priority list for insurance companies and policymakers.
There are many opinions about the Health insurance Marketplace and the coverage it provides. However you feel about it or what you’ve heard about it, it’s the primary avenue for getting health insurance if you don’t have access to it through your employer or government-based coverage. Because the ACA is such a hot-button issue, many people dismiss it entirely without knowing much about it, which severely limits their options, causing more harm than good.
Who is eligible for a plan through the Health Insurance Marketplace?
Anyone who does not have access to employer-based coverage can enroll in a health insurance plan through the marketplace, provided enrollment is completed during the annual enrollment period, or during a special enrollment period for unique circumstances.
A common misconception about marketplace plans is that you must be below a certain income level to be eligible for coverage, but that is not the case. The income thresholds apply to the subsidies, which by definition are advanced premium tax credits (APTC), but if your income is too high to be eligible for a subsidy, you can still enroll in a plan for the full cost. In addition, there are other situations aside from income that would result in ineligibility for a subsidy, but coverage can still be issued at full cost.
The Health Insurance Marketplace is intended to provide health insurance for the self-employed, individuals who are not offered health insurance through their employer, individuals not eligible for Medicaid, or retirees under the age of 65, making them not yet eligible for Medicare.
What is the coverage like with Marketplace plans?
The Health Insurance Marketplace provides plan options from a variety of different insurance carriers across many different states. Although the plan’s structures and coverages are what many people come to expect from a health plan, such as coverage for emergencies, hospitalization, injuries, preventative care, prescription drugs, and doctor visits, one should expect higher deductibles and out-of-pocket costs. This is true across the board when it comes to individual health insurance plans.
Marketplace pans are categorized by “metal levels” bronze, silver, and gold. The metal level corresponds with the amount of cost-sharing (portion of costs the policyholder is responsible for) that’s required. Bronze plans have higher deductibles and out-of-pocket costs, silver plans have slightly lower deductibles and perhaps a few copays before the deductible must be met, and gold plans have the lowest deductibles and out-of-pocket limits.
It’s important to keep in mind that for example, a silver plan is not always a “better” plan than a bronze plan, and so on. As you go up in metal level, monthly premiums increase substantially, decreasing their overall value. Even with a subsidy, silver and gold plans can have very high premiums. The most important thing is to choose a plan that’s a good overall value for the coverage you need.
Lastly, all marketplace plans are required to fully cover (no cost-sharing to the policyholder) what is labeled as “essential health benefits” by the ACA. These include things like no-cost preventative care and annual physicals.
What are the benefits of a Marketplace plan vs. non-Marketplace plans?
Marketplace plans are not the only individual health insurance plans available. Plans such as short-term medical and defined benefit plans do not have to adhere to the requirements of the Affordable Care Act, so they have some major differences when compared to Marketplace plans. Depending on your health history, household income, cost concerns, and coverage needs, a Marketplace plan may be a better option than a non-marketplace plan or vice versa.
Examples of reasons why you may be better off with a Marketplace plan include:
Serious or ongoing health issues – If you have ongoing health concerns or a recent history of them, a Marketplace plan is your only option because you cannot be denied coverage based on your health status. Non-ACA plans are medically underwritten, so there is a good chance your application will be declined if you have significant health issues. Even if you’re just somebody who gets sick often or sees a doctor many times a year, an ACA plan may be the safe choice.
Pre-existing conditions – In a similar regard, if you have pre-existing conditions from the last 5 years or so, even if it’s fully resolved, a marketplace plan should be considered because ACA plans do not exclude coverage for pre-existing conditions, but all non-ACA plans have these exclusions for at least the first year of coverage.
Subsidy Eligibility – If your household income is at a level that makes you eligible for a premium subsidy with the marketplace, it can be your most affordable way to get comprehensive coverage. In some cases, subsidies can allow individuals to enroll in free or very low-cost plans.
Expensive medications – If you regularly take a prescription medication that’s expensive, in some cases the marketplace is the only way to get it covered so it’s affordable. Non-ACA plans have limited coverage for prescriptions, though no coverage will be issued for a medication related to a pre-existing condition with non-ACA plans.
Pregnancy – If you’re currently pregnant and require individual health insurance, a marketplace plan would be your only option for coverage. Non-ACA plans will not approve applications for individuals who are currently pregnant. In addition, all marketplace plans cover maternity care, while most non-Marketplace plans do not.
What are some drawbacks of Marketplace plans?
When it comes to individual health insurance, there is no one perfect solution. What may be a good option for one person may not be for another. Marketplace plans have their fair share of shortcomings, which include:
Limited Provider Networks – All marketplace plans regardless of insurance carrier use HMO provider networks. These networks are more restrictive with where you can go for in-network doctors and facilities. HMOs are typically focused on providers in a specific geographic area such as a major city or area of a state. However, it’s important to remember emergency care does not require one to be in-network. When choosing a marketplace plan, one of the most important things to do is to make sure the doctors and hospitals you would want to go to are in-network with the plan you’re considering. If not, understand that you will have to find a new doctor.
High Monthly Premiums – If your household income is too high to qualify for a substantial subsidy, monthly premiums for marketplace plans can be extremely expensive. Rates of $1,000+ per month are not uncommon for higher age group individuals and family coverage without a subsidy.
Strict Enrollment Deadlines – Marketplace plans can only be enrolled in during the annual enrollment period (AEP), which takes place each year from November 1st through December 15th. Coverage then begins on January 1st of the new year regardless of what date the enrollment was completed during the AEP. Unless you qualify for a special enrollment period (SEP) based on a handful of specific circumstances, the AEP is the only time to enroll in a marketplace plan for the coming plan year.
How do subsidies work with Marketplace plans?
What makes the Health Insurance Marketplace unique is that it provides subsidies from the federal government. Depending on your household income, where you live, household size, and your age, you may qualify for a subsidy that is put towards the cost of your monthly premium. The lower your household income and/or the more members in your household, the more subsidy you’ll be eligible for. In some cases, Marketplace enrollees can have access to plans for $0 per month.
Because everyone’s household income, size, and age are different, it’s difficult to define a “cut-off” for the maximum income for subsidy eligibility. The best way to determine if you might qualify for a subsidy is to use a subsidy calculator or talk to a broker/agent so they can review your information and determine if you would qualify.
The marketplace also provides what is known as a “Cost-Sharing Reduction” (CSR) for lower-income enrollees. Those eligible for a CSR will have lower deductibles, coinsurance, out-of-pocket maximums, and copays. CSRs only apply to Silver-level plans when applicable.
Marketplace subsidies are what’s technically known as an Advanced Premium Tax Credit (APTC). It is a tax credit that is given to eligible enrollees in advance, instead of at the end of the fiscal year. When applying for a Marketplace plan, you’ll make your best guess for your household income for the coming year. If you end up making more than what you anticipate, your subsidy will be adjusted and you will owe the extra advance you received when you do your taxes. The same is true if you make less than expected, in which case you’ll receive a refund for the subsidy amount you would have received.
Some people assume they are “penalized” when they end up making more income than they originally predicted to the marketplace, but the tax credit is simply being reconciled. The same is true the other way around. Marketplace enrollees can always update their income on their Marketplace application throughout the year if they discover at any point that their income will be different than what they had originally guessed.
Household income is the combined income of the tax household. If you’re married and filing jointly, this would be the combined income of you and your spouse, regardless of whether both of you are applying for coverage or not. To put it simply, any taxable income you expect to get for the coming plan year should be included. This includes things like wages and salary from a job, self-employment income, social security payments, investment or retirement income, etc. When applying during the annual enrollment period, your past income is not a factor, only the income you expect to earn for the coming year.
Predicting household income is not always easy, especially for self-employed workers. It’s important to make your best guess and round up slightly if you’re uncertain. It’s better to get a refund for overestimating than owing for underestimating your income. Keep in mind that everyone on the Marketplace is simply making a guess about their household income for the coming year, so you’re not alone. You can always update your income to the marketplace throughout the year when you get a better idea of what it’ll actually be.
Subsidies are also determined by your age and number of household members. The higher your age and/or the more household members you have, the more subsidy you can be eligible for.
Believe it or not, it is possible to have too low of a household income to be eligible for marketplace subsidies as well. If your income is below a certain amount for your age and household size, the Marketplace is required to refer you to your state’s Medicaid and/or CHIP program. If you apply for Medicaid and are deemed ineligible, you can then revert back to the marketplace and enroll in a plan, most likely for free. In this case, you will have to provide documentation that you were denied Medicaid.
Lastly, there are some situations where despite your income and household size, you can still be ineligible for marketplace subsidies. You can still enroll in a Marketplace plan in this case, but you must pay the full premium of the plan. Examples include if you’re married but NOT filing jointly, if you’re offered coverage through an employer, or if you will be claimed as a dependent on someone else’s taxes.
Conclusion
There are many things to consider when looking for an individual/family health insurance plan. Since there are only a small handful of options available, it’s important to understand how they all work. With the Health Insurance Marketplace being the primary method for acquiring individual health insurance, it’s not something anyone should dismiss, especially because for the right person, they offer the best coverage available.
The many intricacies of the Health Insurance Marketplace, which includes subsidies, the plans themselves, and their benefits and drawbacks is a lot of information to take in. That’s why it’s best to speak with an experienced agent/broker to help you understand your options and provide recommendations for a plan that suits your needs and cost concerns.
This information is provided by HealthCare Advisors, a Cincinnati, Ohio-based individual health insurance broker dedicated to helping folks find the coverage thats right for them, for the right value. Our services are available for residents of OH, KY, IN, FL, GA, NC, MI, AZ, MO, SC, and TN. CLICK HERE to schedule a free, no-obligation phone consultation to learn more about your health insurance options.